A PwC Foreign Portfolio Investor Survey shows that 67% of FPIs worldwide believe that India is an attractive investment destination among emerging markets.
In a press release, Gautam Mehra, Leader – Tax and Regulatory, PwC India said, “One of the key takeaways from the survey is that investor opinion about the Indian tax and regulatory environment is slowly moving in a favourable direction. The government has given a thrust to the establishment of a long-term, stable, predictable and non-adversarial tax regime to improve the ease of doing business in India. All these factors will benefit the climate for investing into India.”
The growing appetite for India is evident from portfolio investments in debt and equity markets. Though there has been a slowdown last year, the CAGR of cumulative investment inflows into India in the last decade (2006-07 to 2015-16) has been 17%.
The report also states that investors are satisfied with the individual FPI limits for investment in a company. Currently, an FPI is not permitted to purchase equity shares of more than 10% of the total issued capital of a company. Further, the total FPI investments in a company cannot exceed 24% of its total paid-up equity capital. Investors find these limits adequate. Around three out of four respondents said that the present limit set at 10% by SEBI for FPIs is adequate.
However, it is worth noting that a considerable number of respondents have a high appetite for investment. Around one-fourth of the investors indicated their high investment appetite by asking for an increase in these limits beyond 10%.
While considering the tax rates, around 60% of respondents are satisfied with the tax currently levied on capital gains. At present, long-term capital gains on listed equity shares are taxed at nil and short-term capital gains on listed equity shares are taxed at 15%.
However, the report states that further rationalisation can be done by the government with respect to the taxation of derivatives:
- FPIs should be given the option of categorising their income from derivative transactions as business income, if this is more beneficial to them.
- The short-term capital gain tax on derivatives should be brought on par with that on equities.
